I.T.A. NO.552/LB OF 1992-93 VS I.T.A. NO.552/LB OF 1992-93
1997 P T D (Trib.) 2002
[Income-tax Appellate Tribunal Pakistan]
Before Nasim Sikandar, Judicial Member and Inam Elahi Sheikh, Accountant Member
I.T.A No.552/LB of 1992-93, decided on 05/11/1996.
Income Tax Ordinance (XXXI of 1979)---
----S.22---Income from business ---Assessee, an individual returned, sales and income---Assessing Officer, disbelieving assessee's version computed income at higher rate with higher G.P. rate on the grounds of the assessee having rich experience and good business location---First Appellate Authority gave some relief but assessee, still being dissatisfied, went for further appeal-- Held, the Assessing Officer did not evolve any basis whatsoever to estimate sales and resorted to stock phrases like experience of the assessee and location of his business---While rejecting the declared version, Assessing Officer must support his estimates by cogent reasons failing which his substitution would hardly stand at a better footing against the declared version---Income of assessee was considerably reduced by Tribunal in circumstances.
Ahmad Numan Sheikh, I.T.P. for Appellant.
Mrs. Sabiha Mujahid, D.R. for Respondent.
Date of hearing: 5th November, 1996.
ORDER
NASIM SIKANDAR, (JUDICIAL MEMBER).---The assessee in this further appeal for the year 1991-92 is an individual and derives income from sale of cloth on wholesale basis at Azam Cloth Market, Lahore. As against returned business income at Rs.80,250 total income for the year was computed at Rs.2,36,396. The returned results were discarded on account of the rich experience of the assessee as well as the location of his business. The returned sales on estimate basis at Rs.22,50,000 and the gross profit rate at 6% were disbelieved. These were, therefore, estimated at Rs.40,00,000 and subjected to a G. P. rate of 7% to make an addition of Rs.1,45,000 in the business income already declared. The expenses as claimed were allowed to compute total income as said above Before the First Appellate Authority it was stated that previously the assessee was engaged in doing same business as a registered firm with two other partners who withdrew their capital and, therefore, the returned results were quite reasonable keeping in view the left over capital. It was also submitted that the firm returned sales at Rs.42,00,000 in the year 1989-90 and after the dissolution of the firm and parting ways with the assessee other partners declared sales at Rs.19,50,000. According to the assessee this figure ought to have been reduced from the sales adopted for the year in respect of the assessee if the Assessing Officer had to follow the history of the case and estimate the sales keeping in view of those determined in respect of the registered firm in the previous year. Learned First Appellate Authority CIT(A) Zone-IV, Lahore on 23-5-1992 apparently being convinced with part of the submissions directed reduction of the sales for the year to Rs.30,00,000. However, the assessee is still not satisfied. Hence this further appeal.
2. Parties have been heard. Learned A.R. for the assessee contends that earlier the assessee alongwith two other persons Sh. Muhammad Ilyas and Sh. Muhammad Ijaz was engaged in business as registered firm and after its dissolution the capital as well as the participation of other two partners having been withdrawn, the Assessing Officer should not have followed the history of the case as registered firm. He admits that rejection of accounts was not contested before the assessing officer yet history of the case as registered firm. He admits that rejection of accounts was not contested before the Assessing Officer yet stresses that the estimate of sales as finally determined by the First Appellate Authority is still on the higher side. Learned A.R. for the assessee informs us that in the years 1988-89 and 1989-90 the sales of the firm were respectively estimated at Rs.40,00,000 and Rs.42,00,000 at first appellate level. In the year 1990-91 sales declared at Rs.23,50,000 were accepted under section 59(1) of the Income Tax Ordinance. In the next two years 1992-93 and 1993-94 as against returned sales at Rs.15,00,000 and Rs.16,00,000 these were finally determined by the First Appellate Authority at Rs.25,00,000 and Rs.28,00,000. From these submissions learned A.R. for the assessee claims that estimation of sales in the year under review is still on the higher side.
3. Learned D.R. opposes the prayer for a further reducible.
4. Having heard the parties we are inclined to partly agree with the submissions made for the assessee. Even if the history of the case/firm is kept in sight the estimation of sales in the year under review appears excessive and on the higher side. The sales as finally determined in the succeeding two years also support the submissions made at the Bar. Even otherwise we have noted that the Assessing Officer did not evolve any basis whatsoever to estimate the sales and resorted to stock phrases like experience of the assessee and location of the business premises. It is by now well settled that even after the rejection of declared version an Assessing Officer must support his own estimation of the business volume of an assessee failing which his substitution would hardly stand at a better footing against the returned version of an assessee.
5. This being so, we will consider it appropriate to direct to Rs.25,00,000.
6. The appeal succeeds to this extent.
C.M.S./367/Trib.Order accordingly.